Gasoline prices expected to fall by Summer's end

During the April-through-September summer driving season this year, regular gasoline retail prices are forecast to average $3.61/gallon (gal), 3 cents higher than last year and 4 cents higher than projected in last month's STEO. The projected monthly national average regular gasoline retail price falls from $3.72/gal in May to $3.51/gal in September. EIA expects regular gasoline retail prices to average $3.48/gal in 2014 and $3.39/gal in 2015, compared with $3.51/gal in 2013.

Brent crude oil spot prices averaged $108/barrel (bbl) in April. This was the 10th consecutive month in which the average Brent crude oil spot prices fell within a relatively narrow range of $107/bbl to $112/bbl. New pipeline capacity from the Midwest into the Gulf Coast helped reduce inventories at the Cushing, Oklahoma storage hub to 25 million barrels by the end of April, the lowest level since October 2009. The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell below $4/bbl in early April. Total U.S. commercial crude oil stocks at the end of April reached a record high of nearly 400 million barrels, which is expected to put downward pressure on crude oil prices. EIA projects Brent crude oil prices to average $106/bbl in 2014 and $102/bbl in 2015 and the WTI discount to Brent to average $10/bbl and $11/bbl in 2014 and 2015, respectively.

EIA estimates U.S. total crude oil production averaged 8.3 million barrels/day (bbl/d) in April 2014, which would be the highest monthly average production since March 1988. U.S. total crude oil production, which averaged 7.4 million bbl/d in 2013, is expected to increase to 8.5 million bbl/d in 2014 and 9.2 million bbl/d in 2015. The 2015 forecast represents the highest annual average level of production since 1972.

Natural gas working inventories on April 25 totaled 0.98 trillion cubic feet (Tcf), 0.79 Tcf (45%) below the level at the same time a year ago and 0.98 Tcf (50%) below the previous five-year average (2009-13). Very cold weather and low inventories contributed to volatile Henry Hub natural gas spot prices over the past few months, increasing from $3.95 per million British thermal units (MMBtu) on January 10 to a high of $8.15/MMBtu on February 10, before falling back to $4.61/MMBtu on February 27, and then bouncing back up to $7.98/MMBtu on March 4. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.74/MMBtu in 2014, $0.30 higher than in last month's STEO, and $4.33/MMBtu in 2015.